Bloomberg
IBM’s patent slips as companies resist ‘Godfather’ offers
(Bloomberg) – International Business Machines Corp. reigns for nearly three decades as the best recipient of patents in the United States. In the last five years, the annual income earned by the technology giant from the rights has decreased and the total number of patents Unfavorable precedents of the Supreme Court and an encouraging technology industry threaten a reliable cash machine. Intellectual property rights have historically brought in an average of more than $ 1 billion a year, which reimburses the enormous costs of research and development and reduces revenue. Last year, IBM’s intellectual property revenue was $ 626 million, the lowest point since 1996, and 2019 was not much higher. While it continues to secure license deals, it is less and less won, with companies like Airbnb Inc. and Chewy Inc. fighting in court. In 2020, for the 28th consecutive year, IBM topped the list of patent recipients with 9,130 patents, while Samsung Electronics Co. second was with 6,415. IBM has received the most patents in three of the ten fastest-growing fields in technology – quantum computers, machine learning and computer systems that use neural networks to mimic the human brain, according to a recent study by IFI Claims Patent Services of Fairview Research. , once one of the world’s best-known computer companies, is inventing its 109-year-old self and shedding its legacy infrastructure unit to focus on more modern cloud and artificial intelligence industries. Although IBM is at the forefront of patents in areas that he believes will keep the company competitive in the future, the most claimed patents come from the early days of the Internet. In February, online pet food retailer Chewy sought a court order blocking a $ 36 million patent fee demanded by IBM. Chewy accused IBM of “charging exorbitant license fees for early internet patents that have no value.” IBM’s claims on Chewy include years of inventions such as targeted advertising and the size of the content based on the pointer activity, both ubiquitous on the web. for the past twenty years, but rather threatens to sue if businesses do not agree to pay for licenses. IBM did not respond to Chewy’s complaint and no trial date has been set. Patent trolls are often referred to as companies that aggressively use their IP licensing as a way to make money. However, IBM’s position as the largest collector of American intellectual property is more related to the fact that he is a patent father, says Robin Feldman, a law professor at the University of California, Hastings. With more than 38,000 active patents in its portfolio, and thousands of licenses, Feldman said IBM’s claims have traditionally been undisputed as its legitimacy is strengthened. Such patents, with large portfolios, can “make offers that cannot be denied.” Even some of the most innovative technology giants have licensed IBM patents over the years. Alphabet Inc. see Google, Amazon.com Inc. and LinkedIn counts among numerous companies that had to pony. IBM has long served as a patent bank for young companies to get their portfolios up and running. Facebook Inc. was not yet public in 2012 when it purchased 750 patents on IBM software and networks. Since Instacart Inc. ready to go public, he bought nearly 300 IBM patents in January, ranging from e-commerce to smart shopping bags. Traditionally, IBM’s patent litigation negotiations have included the threat of a lawsuit if the companies do not pay, according to patent attorneys, but rarely have they gone that far. Recently, more disputes have increased. Last year, IBM sued Airbnb over patented technology dating back to the 1990s, and the giant home equity giant, which has just gone through a very well-known public stock market listing, settled for an undisclosed amount. Booking Holdings Inc. won a case against IBM in 2019 related to targeted advertising on sites such as Kayak, OpenTable and Priceline. IBM’s first patent case filed was in 2018 against Groupon Inc., after the company refused to pay the license fee. Groupon’s attorney, David Hadden, described IBM’s strategy as an industry-wide one targeting high-income companies in hopes of a larger payout. Four early internet patents were the basis of the lawsuit. After two years of litigation, a jury initially awarded $ 83 million to IBM, more than double the amount Google, LinkedIn or Twitter paid for a similar license. On appeal, Groupon later settled on $ 57 million. IBM takes patent infringement seriously. The company spends nearly $ 6 billion annually on research and development and relies on its patents to subsidize the investment, with returns ranging from 10% to 30%. According to some people, IBM puts money on the table. According to Joe Chernesky, an intellectual property professional with experience at Intellectual Ventures and Intel Corp., IBM’s patent portfolio could be worth a constant value of between $ 1 billion and $ 2 billion a year. it was aggressively asserted by even more litigation. For example, Chernesky pointed to Ericsson, a Swedish network and telecommunications company, which generated $ 1.2 billion in intellectual property in 2020, and Nokia Oyj of Finland, which brought in $ 1.7 billion. Although IBM has sued an increasing number of companies, its IP revenue has shrunk. Last year, intellectual property licensing revenue was nearly a third of the 2000 high of $ 1.7 billion, or a recent increase in 2016 of $ 1.6 billion. Feldman, the law professor, attributed the decline to a series of rulings in the Supreme Court that made it easier to invalidate a patent, resulting in lower settlement amounts. “Being the godfather is not what it used to be,” Feldman said. ‘It is not the case that patent aggregation as a business is over. You just earn less money. ‘The move comes at an inopportune time for Armonk, IBM in New York. Its core business is struggling and has seen declining sales in nine of the past ten quarters. During an investor call in January, CEO Arvind Krishna said he was confident that the company’s focus on hybrid cloud and artificial intelligence could help spur revenue growth in 2021. by Krishna which is now going on. The unit handles everyday service operations, such as managing customer data centers and traditional information technology support for the installation, repair and operation of equipment. IBM said in a statement that “the independent company is expected to own intellectual property relevant to the management of infrastructure services.” The unit accounts for approximately a quarter of IBM’s sales and staff. Bloomberg Intelligence analyst Tamlin Bason says Tamlin Bason, if the patent lead expires, the company could be blamed for the slowdown. IBM relies on its skill in patents as a promotional tool, which helps recruit engineers and designers and could get a big PR punch if it ever loses first place, Bason said. IBM still has many ideas. Like most large companies, Big Blue rewards its employees for submitting an idea that can be patented. Idea related to its core businesses is the priority, but IBM is also seeking patents on other things, said Maulin Shah, a patent attorney who worked on IBM patents at a former law firm. ‘They will patent any case, even if Shah said: recent IBM patents include coffee delivery drones and a gas meter that entices you to refill early if you feel stressed. “At some point in the future, they will be able to license the IP,” Shah said, but even IBM may recognize its glory days as the patent no longer exists. IBM President Jim Whitehurst said in a recent interview with Bloomberg at the Montgomery Summit that the company was exploring alternative ways to capitalize on its intellectual property. “The patent licensing model is not the future of how you profit from innovation,” he said. (Updates to the comparison with Nokia in the 13th paragraph. An earlier version of this story corrected Ericsson’s patent revenue.) Visit us at bloomberg.com for more articles like this. 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